Moody's said the U.K.'screditworthiness is under downward pressure following the country's decision toleave the EU, withuncertainty surrounding the vote likely to affect economic growth and weakengovernment finances.
Moody's forecasts the U.K.'s realGDP growth at 1.5% in 2016 and close to 1% the following year. "The risksto these forecasts are squarely to the downside, with a much lower growth ratefor 2017 a distinct possibility," the agency said.
Moody's warned that Britain'smedium-term growth prospects could be materially weaker if it failed to reach anew trade agreement with the EU that allows the country "reasonablygood" access to the European single market.
The agency said it expects the U.K.'spublic debt ratio to stagnate close to current levels of about 90% of GDP atbest, adding that asset sales are now unlikely to materialize in 2016.
Still, the U.K. retains credit strengths that are unaffectedby Brexit-related uncertainties, Moody's said, noting that the"credibility of the Bank ofEngland should ensure financial stability, while exchange rateflexibility provides some support for exports and the U.K.'s externalstability."